Grayscale filed an early lawsuit against the US SEC due to the rejection of the Bitcoin spot ETF

Grayscale has announced a legal challenge to its application to convert the Grayscale Bitcoin Trust (GBTC) into a spot bitcoin exchange-traded fund (ETF).

It announced that Donald B. Verrilli, Jr., its senior legal strategist, former U.S. Attorney General and partner at Munger, Tolles & Olson, has filed a petition for review with the U.S. Court of Appeals for the District of Columbia Circuit.

According to the securities regulator’s June 29 filing, the application was rejected “for the protection of investors and the public interest” because the proposal failed to demonstrate that it “was designed to prevent fraudulent and manipulative acts and practices.”

A similar decision was made Wednesday for Bitwise's bitcoin exchange-traded product (ETP), for the same reasoning.

Grayscale, which manages $12.92 billion in assets in its GBTC, has been awaiting a decision from the SEC to convert its flagship bitcoin trust into a spot ETF since filing with regulators on Oct. 19, 2021.

The decision came a week before the July 6 deadline.

Earlier this month, Grayscale announced it had hired former U.S. Attorney General Donald B. Verrilli Jr. to prepare for a potential legal battle with the SEC should his application be denied.

Other lawyers on Grayscale's legal team include attorneys at Davis Polk & Wardwell LLP and its in-house counsel, including Craig Salm as chief legal officer.

In March, Grayscale CEO Michael Sonnenshein told Bloomberg that his firm would consider filing a lawsuit under the Administrative Procedure Act (APA) if financial regulators rejected its application for a bitcoin spot ETF.

Bloomberg Intelligence ETF analyst James Seyffart told his 19,400 Twitter followers on Wednesday that the SEC's decision on the two ETFs came sooner than he thought, but both were expected.